The real stories from inside the F1 paddock

From Russia with cash…

Virgin Racing announced in Abu Dhabi that Marussia Motors has bought “a significant shareholding” in the team. From the start of 2011 the official team name will change to Marussia Virgin Racing. But what is a Marussia – and why do some Russian businessmen want to be involved the Formula 1 World Championship?

It is not what you think… In the most recent edition of the e-magazine GP+, we ran a story about the men behind Marussia. It is a fascinating story..

It is only a few weeks since Bernie Ecclestone flew to Sochi and announced plans for a Russian Grand Prix in 2014. Since then Russia seems to have started to pay more attention to the F1 world. It is new and exciting and recently Prime Minister Vladimir Putin drove a Grand Prix on a track near St Petersburg. After years trying to break into the Russian market, Bernie Ecclestone suddenly finds himself inundated with all things Russian…

The country has undergone significant changes since the collapse of the Soviet Union, switching from being a state-run economy to a much more market-based model. The rapid privatization process that turned over major state-owned firms to well-connected “oligarchs” has given Russia a bad name. So the first reaction these days when one hears about “Russian money” is to assume that it comes from one oligarch or another. What is often forgotten is that there are some rich Russians who made their money in the old fashioned way, using their brains and having a bit of nous.

Sir Richard Branson, founder of the Virgin Group, is a man who is always looking for a good deal and he is much admired for his ability to create opportunities from Virgin, without costing the firm much money. Often this is written off as being self-promotion, but Branson’s skill has been to use his fame to allow others to gain a higher profile, or create businesses, by associating with him and with the Virgin brand. Most of the money that was raised for the team this year came from companies trying to do that. Marussia Motors was just such a company and became a sponsor of the new team at the start of 2010.

Virgin was particularly attractive to Marussia because the team was innovative, hoping to create a new business model for F1, which the partners involved believe will one day be copied by other teams. They committed to relying on technology – in the form of computational fluid dynamics (CFD) – rather than having to invest in the expensive wind tunnels that the other F1 teams all use. If Virgin Racing becomes more competitive in 2011 and 2012, there will be a clear signal for everyone that CFD technology has reached a point at which it can take over from wind tunnels. It is an ambitious idea, particularly as the team was launched in the middle of a serious economic downturn. The argument, however, was that with research and development costs kept to a minimum, there was more potential for the partners to make a profit from the sport – which makes the team much more attractive to investors. For the moment the rest of the F1 grid are sceptical about the Virgin Racing business plan, but Marussia has bought into the idea – and into the company.

The Marussia story begins with Nikolai Fomenko (right, l-r Fomenko, with partners Efim Ostrovsky and Andrei Cheglakov), a showman who started his career in the pop world back in the days of Soviet Russia. He was one of a group that modelled themselves on the Beatles and called themselves Secret. They enjoyed much success in the early 1980s. Fomenko moved on to become a television presenter and personality, appearing in a number of TV series, mainly comedies before becoming the host of the Russian version of The Weakest Link and, more recently, the host of Top Gear Russia, a spin-off of the hugely successful British car programme. Along the way Fomenko married the glamorous Russian movie star Mariya Golubkina. Fomenko’s dream of running a car company was supported by a well known philosopher and brand strategist called Efim Ostrovsky, who was famous for his writings about the social trends of post-Soviet Russian society. They decided on the name Marussia, which is a play on words as the affectionate version of the name Mariya is Marusya, which ties in nicely with the name of the country. A showman and a philosopher are perhaps not the obvious people to be running a car company named after a film star. They needed some more business experience (and money) and so turned to Andrei Cheglakov, a celebrated entrepreneur, who had made his name by building a electronics empire.

Cheglakov was trained as a mathematician at Moscow State University. He was employed by the USSR’s Academy of Science, based in the city of Tyumen in western Siberia but when Soviet Russia began to fall apart in 1991 he set up a company called Stipler, which rapidly became very famous for its Dendy computer game console. Japan’s Nintendo had launched its Family Computer (usually known as Famicom) video game console back in 1983. It had then been launched into the American and British markets in 1985 as the Nintendo Entertainment System (NES).The company would sell 62 million devices, but it did not patent the device in Russia and Cheglakov saw an ooportunity and, sourcing units from manufacturers in China, he launched a clone of the NES for the Russian market at the end of 1991. Dendy was an amazing success, its sales powered by a huge advertising campaign, particularly on television. These were so popular that they eventually generated a Dendy TV show, Dendy-branded stores and the word Dendy ended up being used by many Russians as the generic name for all game consoles, in much the same way as Hoover has lomg been used in the west as the word for a vacuum cleaner. In the space of just three years Dendy sold six million units, creating a spectacular profit as each reatiled at around $90. Dendy did ultimately reach an agreement with Nintendo, although legally-speaking the Japanese firm had only itself to blame for not patenting the devices in Russia. Cheglakov did not stand still and was soon investing his fortune in software development, other new technologies and in businesses importing foreign computers into the Russian market. Cheglakov is very low profile and rarely talks to the media but as the man funding the whole Marussia project, he is obviously a key figure.

“The most important thing about Marussia is that the name represents my country,” he says. “That is of great significance for me. It is supposed to be helpful for the country and for the Russian people, so that they can see what is possible and that they can provide something for the world – and that Russia can supply something to the world.

“A few years ago I read an interview with Vijay Mallya and I was strongly impressed by the way he undersands his role as a businessman in terms of Indian development and this is what we need to do. I am a son of my country.

“Dendy was a good education as I learned how to market products. I was hungry for new products all the time. When I saw the possibility of getting something new and marketing it in my country, I would do it.”

Cheglakov sees the launch of Marussia as a major event for the nation.

“The launch of our car is very much like the launch of the first Russian Sputnik or like the launch of Diaghilev’s “Russian Seasons” in Europe”.

Cheglakov does not deny the suggestion that the Marussia supercars are based on the Pagani Zonda platform. The Italian supercar company has been building Zondas since 1999 and is now moving on to a new model and new production techniques, which will be homologated for new markets, notably the United States and China. It is entirely logical for the firm to sell its old technology to a new company, with new ideas. It is the latest twist in the story of platform engineering in the automotive world.

“In the IT world it is crucially important to be flexible, to react and to predict,” says Cheglakov. “If you look at the car industry now there are a lot of opportunities. It is still a heavy metal industry but in the last five to 10 years they have had to have more flexibility.”

The Marussia development plan is to introduce a string of new models very quickly. Is it, therefore, logical to suggest that this will be achieved by buying other platforms from manufacturers than no longer need them and then adding innovation and styling.

“Yes,” replies Cheglakov.

In terms of the target audience for the Marussia supercars, the aim is to be competing with the lower end Lamborghinis. There are currently two versions of the Marussia supercar: the B1 and the more aggressively styled B2. The first Marussia show room opened two months ago in Moscow and the company’s SUV has been unveiled and will go into production soon.

“The basic idea is to create a ’boutique’ car company with a low production figure in terms of numbers, but to concentrate more on the margins,” Cheglakov explains. “We don’t want to make hundreds of thousands of cars. If we can achieve 20 or 30,000 it would be great.”

Cheglakov says that the core brand value of the Marussia is simply being different.

“Why do people buy a Ferrari?” he says. “It is not only because of history or because of Italian design – which is superb – but it is about a combination of different things. In my opinion people buy sports cars mostly not to drive, but to be unique and it is diffcult to imagine that you can be unique if you buy a car that everyone can buy. Buying a Marussia means you will be unique. Another reason that people will buy it is because it is Russian and, of course, it is a supercar and I can promise you that the car will be satisfying. If the customers are not satisfied then we will replace the car.”

The F1 programme is more than just marketing.

“The number of shares that we have in the team is not the important thing,” he says. “I really admire what the people there have done in a very short period of time and without much F1 experience. The car is not so bad and now the performance is getting better and better. There is still a gap to the other teams but we can see the potential to close that gap next year and to be among the other teams.

“From our side we can improve our road car technology as well, because the technology that they create in the F1 car is very similar to what we use in our road cars and so it will be much easier for us to create a better product.”

The road car will feature a metal body shell with composite panels, but Cheglakov is looking ahead for new materials.

“I think we need to find new ways of thinking about cars,” he says. “This is important for us. In Russia there are a lot of new things that did not exist in the Soviet time so they could be upgraded. We have had to build new things, but there are better than elsewhere because they are new. It is an advantage.”

The car will sell mostly in Russia but Cheglakov says that he expects there to be buyers all over the world.

The company does not have any government support, even though it is the kind of company than Prime Minister Vladimir Putin is keen to see develop in Russia.

“He is a busy man,” Cheglakov says. “We would love to talk to him. He has reshaped the Russian economy and now we are beginning to see the results of that. The face of Russia is changing. It is much more friendly.”

Russia’s image problem remains and there is a long road to take before that will change. Cheglakov and his partners know this, but they push the message nonetheless.

“We want to tell the world that Russia is changing,” he repeats.

The news that a Russian company will have influence in a Formula 1 team and may even take control of Virgin in a year or two, has led to inevitable rumours about the team hiring Vitaly Petrov, but Cheglakov argues that this does not make sense as it is better to continue to increase Russian interest in the sport by having a driver and a team separate from one another, rather than putting all the eggs in the same basket.

The details of the deal with Virgin remain confidential but the team management say that the Marussia deal is a big step forward.

“This is definitely a good news story for Virgin Racing and for Formula 1,” says the team’s MD Graeme Lowdon. “Marussia Motors has been a much-valued team partner throughout the 2010 season and we are delighted to introduce them formally as the significant shareholder in Virgin Racing and a major force in the team’s future. This announcement cements our place on the Formula 1 grid and is testimony to the hard work and dedication of every single member of our team.”

The arrival of Marussia will be a big help in increasing Russian audiences in F1, which is important in the run-up to the first Russian GP in Sochi in 2014.

“This is the realisation of a dream for Marussia Motors”, Fomenko says. “While manufacturing, launching and marketing the Marussia B1, B2 and other concepts in Europe, we will have a Formula 1 team to promote these activities and demonstrate to the world that a new car manufacturer has arrived from Russia with truly international ambitions.”

The investment by Marussia Motors does not affect the other team shareholders. They all remain but the percentages have changed. The day-to-day running of the team will not change, with John Booth still calling the shots as Team Principal.

“I am extremely proud of what we have achieved in what is really only 16 months,” he says. “I am delighted that the efforts of the team have been recognised and have attracted the commitment of Marussia Motors, which will enable us to move forward towards our five year target for success.”

This is an optomistic piece indeed! Sure it is not your words Joe, but reporting those of the teams backers… but still! Lets see the facts, Virgin came dead last in 2010, not to a well heeled team, but to HRT, the team on the verge of failing. The supposed benifit of CFD did not pay off this year and is very highly unlikely to next. With HRT gone Virgin will be the tail end charlies again next year, but with no one else to make the poor times look respectable, I would expect to see Lotus disapearing of into the distance. Unless something drastic happens in the way the team runs, making a profit is a joke! Now we have the new FIA rule preventing teams working on cars overnight. So Virgin now has a testing ban and curtailed race weekends. So where is the improvement going to come from to make this all a sucsess? A dose of reality is needed at that team!

Wow a heart warming tale that proves to young kids that if you study hard and rip off someone else’s invention, you’ll one day get to buy other peoples car designs once they become obsolete and sell them to naive Russians with more money than sense

New is not better. This is a common missconception. Especially when its just old with a new veneer. Better is better. Still, Marussia and Virgin are perfect partners. They both suffer from delussions of grandure.
P.S. Why would anyone expect Virgin to do better next year? Who do they extect to fail more misserably than themselves (other than HRT, obviously, who don’t even count)?

My first thought when I saw your marvellously telling iPhone snapshot of the three Marussia owners was, “Oh no, a Belorussian version of DelBoy and Rodney… Only Fools and Horses”. Just what F1 needs right now!

But as you carefully explain, having received the Branston Pickle, I mean the Branson Blessing, we have to take them more seriously than the Late Tom’s Nigerian Arrows sponsors.

That will be problematic considering their name, “Marussia Virgin”.

What is the feeling about CFD? Too early to tell? Anybody else dabbling with it?

Thanks Joe, you just answered every question I had in regard to Marusia and who/what they are.

I hope they manage to do well next year, now that Branson’s mug will not play as prominently a part of the team.
But you can bet if they manage a podium or win he will be front and center in the limelight, absorbing as much attention as possible.

I’m looking forward to seeing how VR will perform next year, the CFD only route is an interesting experiment. Hopefully the extra computing power they recently invested in will help them close the gap to the rest of the grid.

As for Marussia, whilst it may not be the most impressive product they are going to be selling (in that they are re-worked old cars), they at least seem to have their heads relatively screwed on and I’m pleased that the investment they’ve put into VR has secured their position on the grid.

As long as the team essentially remains as Manor, regardless of whose name is on the car, I’ll certainly be supporting them. The love for a local team that have progressed up the ranks far outweighs my dislike of Branson!

Some of the software is so simple to use I think I understand it. It’s like desktop publishing in terms of the experience. (No disrespect to the Linotype men i still know.)

Virgin just took a gamble, that they didn’t need an aero test feedback loop in the early / mid design phase.

The fun thing with numbers, particularly computed numbers, is knowing what they mean. Old trusim: an error in digital compute always has infinite order. i.e. any wrong digit and you’re up the creek.

Of course, Marussia being Russian, and geeks, maybe they’ll revive ternary logic, so we can do fractions as first order, or the Elbrus 2000 processor, or something like that, fully nutty, doomed to failure but exceedingly cool.

But then again, they look like a bright lot, haircuts notwithstanding.

For lots of reasons, I see a fit with them from their history.

Think this way, Virgin are going an intellectual route to cut costs. They just got a sponsor who has a few decades in that same skill. Neat.

Virgin Racing just got a whole load more interesting.

Don’t snipe at Marussia being a non player in the motor world. You’d not sniff at Von Koenigsegg. Somehow everyone gives way too much credo to Lotus. Heck, Lotus’ most inteteresting motor is a modded Elise, not their work, see Jay Leno for a review.

The gist here is we have geeks playing with cars. These guys look like proper geeks. They sniff the right way, down to the haircuts. If you’re playing that game, this looks the right plan.

that guy looks like the younger edition of the man who gave me a proper break. GrandMaster ELO rating, fluent, almost native Russian speaker, author of several books on cultural history and logic, and the kind of guy you’d want to be on your side in any sort of fight. Geez, it’s been too long, must pickup the phone.

Wasn’t the main joke of Fools and Horses, that Rodney was the brains, but never got the breaks?

“If I have seen farther than others, it is because I was standing on the shoulders of giants. Albert Einstein”

and an even older admonishion:

“don’t re-invent the wheel”

You are caegorically missing the point that the Russian computer industry had to do all of those things.

They also put into circulation, usually in mathematical papers, because that was sufficiently abstract not to get censored, a vast body of work which actually spurred on the best decades of technical development in the USA and Europe.

Oh dears, let`s go to Moscow for only one week before write about successful Russians and Russia. It looks everybody of you knows Russia only from an American movies. I am afraid connection with Russians is much bigger mistake for Virgin Racing than their naive belief to be competitive without wind tunnel.

But with Russians I don’t follow the money, i follow the ideas. Those are usually much better.

We all know they’ve got a PR problem, minute we follow the money. Go to Cyprus.

Privately, I know very well how annoying they can be. Your link says you’re Czech. Fair cop. You guys did a ton for us Brits. Never forgotten, never will be forgotten. But maybe we can stop going on about the Cold War, or the real war, or well you know the dates.

Yes, I agree with you, Russia has a long way to go. But it’s relative. Real competitors keep pace. That’s why we like F1.

I’d be surprised if there are ever any more Marussia’s sold than there were Smolenski era TVRs.

Muscovites are terrible snobs, and they do bling unlike anyone. But to sell bling succesfully (at good margins, or in commercial quantities) needs ‘status’ or ‘heritage’ and Marussia simply doesn’t have either.

I’m surprised by Cheglakov’s view of the market ‘In my opinion people buy sports cars mostly not to drive, but to be unique and it is diffcult to imagine that you can be unique if you buy a car that everyone can buy’.
928 v 911?

While I was both well I can’t the partnership lasting or 20/30,000 sales pa.

(Subject to Petrov announcing this week he’s going there with Alonso and F1’s biggest budgtet of all time. Or a makeover for the road cars).

Note to Editor (thanks for all the very good stuff, which I read avidly but… this Russia has a few ‘good businessmen while factually correct, how could it not be when there’s 145 million residents, is, generally speaking, guff!)

See what Transparency International says about Russia as a place to do business.